Statistical Supplement Second Quarter 2021
Transcript of Statistical Supplement Second Quarter 2021
Statistical Supplement
Second Quarter 2021
Lincoln Financial Group
Table of Contents
Analyst Coverage and Credit Ratings
Notes
Consolidated
Consolidated Statements of Income (Loss)
Consolidated Balance Sheets
Earnings, Shares and Return on Equity
Key Stakeholder Metrics
Segment and Sources of Earnings
Select Earnings Drivers By Segment
Sales By Segment
Operating Revenues and General and Administrative Expenses By Segment
Operating Commissions and Other Expenses
Interest Rate Yields and Spreads By Segment
Select Earnings and Operational Data from Business Segments
Annuities
Retirement Plan Services
Life Insurance
Group Protection
Other Operations
DAC & Account Value Rollforwards
Consolidated DAC, VOBA, DSI and DFEL Roll Forwards
Account Value Roll Forwards:
Annuities
Retirement Plan Services
Life Insurance
Other Information
Select Investment Data
Realized Gain (Loss), After-DAC
Select GAAP to Non-GAAP Reconciliations
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Lincoln Financial Group
Analyst Coverage and Credit Ratings
Firm Analyst Phone Number
Autonomous Research U.S., L.P. Erik Bass 646-561-6248
Bank of America Merrill Lynch Joshua Shanker 646-855-5716
Barclays Tracy Benguigui 212-526-1561
Citi Research Suneet Kamath 212-816-3457
Credit Suisse Andrew Kligerman 212-325-5069
Dowling & Partners Humphrey Lee 860-676-7324
Evercore Thomas Gallagher 212-446-9439
J.P. Morgan Securities Jimmy Bhullar 212-622-6397
Keefe, Bruyette & Woods, Inc. Ryan Krueger 860-722-5930
Morgan Stanley Nigel Dally 212-761-4132
Piper Sandler & Co. John Barnidge 312-281-3412
RBC Capital Markets Mark Dwelle 804-782-4008
UBS Brian Meredith 212-713-2492
Wells Fargo Elyse Greenspan 212-214-8031
This list is provided for informational purposes only. Lincoln Financial Group does not endorse the analyses, conclusions or recommendations contained in any report issued by these
or any other analysts.
Ratings as of August 4, 2021
Standard
A.M Best Fitch Moody's & Poor's
Senior Debt Ratings a- BBB+ Baa1 A-
Financial Strength Ratings
The Lincoln National Life Insurance Company A+ A+ A1 AA-
First Penn-Pacific Life Insurance Company A A+ A1 A-
Lincoln Life & Annuity Company of New York A+ A+ A1 AA-
Lincoln Life Assurance Company of Boston A+ AA-
Investor Inquiries May Be Directed To:
Albert Copersino, Vice President, Investor Relations
Email: [email protected]
Phone: 203-257-4493
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Lincoln Financial Group
Notes
Computations
• The quarterly financial information for the current year may not sum to the corresponding year-to-date amount as both are rounded to millions.
• The financial ratios reported herein are calculated using whole dollars instead of dollars rounded to millions.
• If the effect of equity classification would result in a more dilutive Earnings Per Share (“EPS”), the numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market
adjustment for deferred units of LNC stock in our deferred compensation plans. In addition, for any period where a net loss or adjusted loss from operations is experienced, shares used in the diluted EPS
calculation represent basic shares, as the use of diluted shares would result in a lower loss per share.
• Return on equity (“ROE”) measures how efficiently we generate profits from the resources provided by our net assets. ROE is calculated by dividing annualized net income (loss) (or adjusted income (loss)
from operations) by average equity, excluding accumulated other comprehensive income (loss) (“AOCI”). Management evaluates consolidated ROE by both including and excluding the effect
of average goodwill.
• Book value per share, excluding AOCI, is calculated by dividing stockholders’ equity, excluding AOCI, by common shares outstanding. We provide book value per share, excluding AOCI, to enable
investors to analyze the amount of our net worth that is attributable primarily to our business operations. Management believes book value per share excluding AOCI is useful to investors because
it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per share is the most directly comparable GAAP measure.
• Pre-tax net margin is calculated by dividing adjusted income (loss) from operations before taxes by net revenue, which is defined as total adjusted operating revenues less interest credited.
Definitions
Holding company available liquidity consists of cash and invested cash, excluding cash held as collateral, and certain short-term investments that can be readily converted into cash, net of commercial
paper outstanding.
Sales as reported consist of the following:
• Annuities and Retirement Plan Services – deposits from new and existing customers;
• Universal life insurance (“UL”), indexed universal life insurance (“IUL”), variable universal life insurance (“VUL”) – first-year commissionable premiums plus 5% of excess premiums received; ® ® SM
• MoneyGuard linked-benefit products – MoneyGuard (UL), 15% of total expected premium deposits, and MoneyGuard Market Advantage (VUL), 150% of commissionable premiums;
• Executive Benefits – single premium bank-owned UL and VUL, 15% of single premium deposits, and corporate-owned UL and VUL, first-year commissionable premiums plus 5% of excess
premium received;
• Term – 100% of annualized first-year premiums; and
• Group Protection – annualized first-year premiums from new policies.
Throughout the document, “after-DAC” refers to the associated amortization expense of deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred sales inducements (“DSI”)
and deferred front-end loads (“DFEL”) and changes in other contract holder funds.
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Lincoln Financial Group
Notes
Sources of earnings are defined as follows:
• Investment spread earnings consist primarily of net investment income, net of interest credited earned on the underlying general account investments supporting our fixed products less related
expenses.
• Mortality/morbidity earnings result from mortality margins, morbidity margins, and certain expense assessments and related fees that are a function of the rates priced into the product and level
of insurance in force.
• Fees on assets under management (“AUM”) earnings results consist primarily of asset-based fees charged based on variable account values less associated benefits and related expenses.
• Variable annuity (“VA”) riders earnings consist of fees charged to the contract holder related to guaranteed benefit rider features, less the net valuation premium and associated change in
benefit reserves and related expenses.
Non-GAAP Performance Measures
Non-GAAP measures do not replace the most directly comparable GAAP measures, and we have included detailed reconciliations herein.
Adjusted income (loss) from operations is GAAP net income excluding the after-tax effects of the following items, as applicable:
• Realized gains and losses associated with the following (“excluded realized gain (loss)”):
O Sales or disposals and impairments of financial assets;
O Changes in the fair value of equity securities;
O Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities (“gain (loss) on the mark-to-market on certain instruments”);
O Changes in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders within our variable annuities;
O Changes in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders reflected within variable annuity net derivative results accounted for at fair value;
O Changes in the fair value of the derivatives we own to hedge our GLB riders reflected within variable annuity net derivative results; and
O Changes in the fair value of the embedded derivative liabilities related to index options we may purchase or sell in the future to hedge contract holder index allocations applicable to
future reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting options”);
• Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders (“benefit ratio unlocking”);
• Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance;
• Gains (losses) on early extinguishment of debt;
• Losses from the impairment of intangible assets;
• Income (loss) from discontinued operations;
• Acquisition and integration costs related to mergers and acquisitions; and
• Income (loss) from the initial adoption of new accounting standards, regulations and policy changes including the net impact from the Tax Cuts and Jobs Act.
Adjusted operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:
• Excluded realized gain (loss);
• Revenue adjustments from the initial adoption of new accounting standards;
• Amortization of DFEL arising from changes in GDB and GLB benefit ratio unlocking; and
• Amortization of deferred gains arising from reserve changes on business sold through reinsurance.
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Lincoln Financial Group
Notes
Management believes that the non-GAAP performance measures previously discussed explain the results of our ongoing businesses in a manner that allows for a better understanding of the underlying
trends in our current business as the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in many
instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. In addition, we believe that our definitions of adjusted operating revenues and adjusted
income from operations provide investors with more valuable measures of our performance as they better reveal trends in our business.
Statistical Supplement is Dated
The financial data in this document is dated August 4, 2021, and has not been updated since that date. Lincoln Financial Group does not intend to update this document.
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Consolidated
Lincoln Financial Group
Consolidated Statements of Income (Loss)
Unaudited (millions of dollars, except per share data)
For the Three Months Ended For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Revenues
Insurance premiums $ 1,342 $ 1,293 $ 1,364 $ 1,406 $ 1,398 4.2% $ 2,715 $ 2,804 3.3%
Fee income 1,458 1,815 1,559 1,592 1,670 14.5% 2,997 3,262 8.8%
Net investment income 1,172 1,458 1,505 1,510 1,584 35.2% 2,547 3,094 21.5%
Realized gain (loss) (647) 629 (470) (181) (2) 99.7% (671) (182) 72.9%
Amortization of deferred gains on business
sold through reinsurance 11 11 9 9 9 -18.2% 22 17 -22.7%
Other revenues 181 155 168 198 192 6.1% 332 391 17.8%
Total revenues 3,517 5,361 4,135 4,534 4,851 37.9% 7,942 9,386 18.2%
Expenses
Interest credited 732 732 734 737 737 0.7% 1,457 1,474 1.2%
Benefits 1,725 2,484 1,966 2,226 1,930 11.9% 4,227 4,156 -1.7%
Commissions and other expenses 1,123 1,599 1,258 1,231 1,326 18.1% 2,207 2,556 15.8%
Interest and debt expense 84 66 65 65 65 -22.6% 152 131 -13.8%
Strategic digitization expense 14 20 23 13 21 50.0% 26 35 34.6%
Total expenses 3,678 4,901 4,046 4,272 4,079 10.9% 8,069 8,352 3.5%
Income (loss) before taxes (161) 460 89 262 772 NM (127) 1,034 NM
Federal income tax expense (benefit) (67) 62 (54) 37 130 294.0% (85) 167 296.5%
Net income (loss) (94) 398 143 225 642 NM (42) 867 NM
Adjustment for LNC stock units in our
deferred compensation plans - (5) - - - NM (10) - 100.0%
Net income (loss) available to common
stockholders – diluted $ (94) $ 393 $ 143 $ 225 $ 642 NM $ (52) $ 867 NM
Earnings (Loss) Per Common Share – Diluted
Net income (loss) $ (0.49) $ 2.01 $ 0.74 $ 1.16 $ 3.34 NM $ (0.27) $ 4.51 NM
ROE, including AOCI
Net income (loss) -2.0% 7.5% 2.6% 4.3% 12.4% -0.5% 8.3%
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Lincoln Financial Group
Consolidated Balance Sheets
Unaudited (millions of dollars)
As of
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change
ASSETS
Investments:
Fixed maturity available-for-sale (“AFS”) securities, net of allowance for
credit losses:
Corporate bonds $ 95,390 $ 98,717 $ 102,789 $ 96,570 $ 101,003 5.9%
U.S. government bonds 504 496 484 444 444 -11.9%
State and municipal bonds 6,393 6,774 6,921 6,625 6,919 8.2%
Foreign government bonds 436 436 470 485 464 6.4%
Residential mortgage-backed securities 3,272 3,203 3,076 3,077 3,027 -7.5%
Commercial mortgage-backed securities 1,226 1,430 1,505 1,516 1,578 28.7%
Asset-backed securities 5,716 6,590 7,184 7,996 8,177 43.1%
Hybrid and redeemable preferred securities 582 606 615 600 603 3.6%
Total fixed maturity AFS securities, net of allowance for credit losses 113,519 118,252 123,044 117,313 122,215 7.7%
Trading securities 4,651 4,633 4,501 4,365 4,232 -9.0%
Equity securities 87 122 129 123 174 100.0%
Mortgage loans on real estate, net of allowance for credit losses 16,578 16,541 16,763 17,255 17,586 6.1%
Policy loans 2,551 2,527 2,426 2,502 2,410 -5.5%
Derivative investments 2,957 3,236 3,109 3,453 4,548 53.8%
Other investments 4,574 4,204 3,984 3,548 3,950 -13.6%
Total investments 144,917 149,515 153,956 148,559 155,115 7.0%
Cash and invested cash 4,201 2,595 1,708 1,350 2,389 -43.1%
DAC and VOBA 7,012 6,307 5,812 7,665 6,261 -10.7%
Premiums and fees receivable 490 498 486 653 583 19.0%
Accrued investment income 1,168 1,320 1,257 1,301 1,254 7.4%
Reinsurance recoverables, net of allowance for credit losses 16,866 16,610 16,496 16,289 15,981 -5.2%
Funds withheld reinsurance assets 535 539 530 528 527 -1.5%
Goodwill 1,778 1,778 1,778 1,778 1,778 0.0%
Other assets 15,905 15,667 15,960 17,298 17,465 9.8%
Separate account assets 146,787 152,975 167,965 171,339 178,795 21.8%
Total assets $ 339,659 $ 347,804 $ 365,948 $ 366,760 $ 380,148 11.9%
`
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Lincoln Financial Group
Consolidated Balance Sheets
Unaudited (millions of dollars)
As of
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Future contract benefits $ 38,604 $ 40,089 $ 40,814 $ 39,591 $ 40,250 4.3%
Other contract holder funds 100,537 102,568 105,405 107,002 108,778 8.2%
Short-term debt - - - 300 300 NM
Long-term debt by rating agency leverage definitions: (2)
Operating (see note on page 6 for details) 866 866 866 866 866 0.0%
Financial 5,870 5,848 5,816 5,428 5,468 -6.8%
Reinsurance related embedded derivatives 245 334 392 244 328 33.9%
Funds withheld reinsurance liabilities 1,867 1,910 1,946 1,976 2,027 8.6%
Payables for collateral on investments 7,031 6,435 6,222 7,597 8,199 16.6%
Other liabilities 17,121 15,230 13,823 12,824 13,392 -21.8%
Separate account liabilities 146,787 152,975 167,965 171,339 178,795 21.8%
Total liabilities 318,928 326,255 343,249 347,167 358,403 12.4%
Stockholders’ Equity
Common stock 5,081 5,093 5,082 5,057 5,021 -1.2%
Retained earnings 8,327 8,647 8,686 8,775 9,245 11.0%
AOCI:
Unrealized investment gains (losses) 7,668 8,153 9,209 6,040 7,756 1.1%
Foreign currency translation adjustment (28) (21) (12) (10) (10) 64.3%
Funded status of employee benefit plans (317) (323) (266) (269) (267) 15.8%
Total AOCI 7,323 7,809 8,931 5,761 7,479 2.1%
Total stockholders’ equity 20,731 21,549 22,699 19,593 21,745 4.9%
Total liabilities and stockholders’ equity $ 339,659 $ 347,804 $ 365,948 $ 366,760 $ 380,148 11.9%
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Lincoln Financial Group
Earnings, Shares and Return on Equity
Unaudited (millions of dollars, except per share data)
As of or For the Three Months Ended As of or For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Income (Loss)
Net income (loss) $ (94) $ 398 $ 143 $ 225 $ 642 NM $ (42) $ 867 NM
Pre-tax adjusted income (loss) from operations 195 (212) 393 421 729 273.8% 752 1,150 52.9% (1)
After-tax adjusted income (loss) from operations 187 (133) 346 350 608 225.1% 652 959 47.1%
Adjusted operating tax rate 4.0% 37.2% 12.0% 16.8% 16.5% 13.3% 16.6%
Average Stockholders’ Equity
Average equity, including AOCI $ 18,653 $ 21,140 $ 22,124 $ 21,146 $ 20,669 10.8% $ 18,393 $ 20,908 13.7%
Average AOCI 5,164 7,566 8,370 7,346 6,620 28.2% 4,751 6,983 47.0%
Average equity, excluding AOCI $ 13,489 $ 13,574 $ 13,754 $ 13,800 $ 14,049 4.2% $ 13,642 $ 13,925 2.1%
ROE, Excluding AOCI
Net income (loss) -2.8% 11.7% 4.2% 6.5% 18.3% -0.6% 12.5%
Adjusted income (loss) from operations 5.5% -3.9% 10.1% 10.2% 17.3% 9.6% 13.8%
Per Share
Net income (loss) (diluted) $ (0.49) $ 2.01 $ 0.74 $ 1.16 $ 3.34 NM $ (0.27) $ 4.51 NM
Adjusted income (loss) from operations (diluted) 0.97 (0.72) 1.78 1.82 3.17 226.8% 3.27 4.98 52.3%
Dividends declared during the period 0.40 0.40 0.42 0.42 0.42 5.0% 0.80 0.84 5.0%
Book value, including AOCI $ 107.28 $ 111.51 $ 118.02 $ 102.50 $ 115.00 7.2% $ 107.28 $ 115.00 7.2%
Per share impact of AOCI 37.90 40.41 46.43 30.14 39.55 4.4% 37.90 39.55 4.4%
Book value, excluding AOCI $ 69.38 $ 71.10 $ 71.59 $ 72.36 $ 75.45 8.7% $ 69.38 $ 75.45 8.7%
Shares
Repurchased during the period - - 1.1 1.9 2.2 NM 3.8 4.1 7.9%
End-of-period – basic 193.2 193.3 192.3 191.1 189.1 -2.1% 193.2 189.1 -2.1%
End-of-period – diluted 194.0 195.3 193.7 192.5 191.4 -1.3% 194.0 191.4 -1.3%
Average for the period – diluted 193.8 195.4 193.9 193.1 192.2 -0.8% 196.2 192.4 -1.9%
(1) See reconciliation to net income (loss) on page 24.
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Lincoln Financial Group
Key Stakeholder Metrics
Unaudited (millions of dollars, except per share data)
As of or For the Three Months Ended For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Cash Returned to Common Stockholders
Shares repurchased $ - $ - $ 50 $ 105 $ 150 NM $ 225 $ 255 13.3%
Common dividends 77 77 77 81 80 3.9% 156 161 3.2%
Total cash returned to common stockholders $ 77 $ 77 $ 127 $ 186 $ 230 198.7% $ 381 $ 416 9.2%
Leverage Ratio
Short-term debt $ - $ - $ - $ 300 $ 300 NM
Long-term debt 6,736 6,714 6,682 6,294 6,334 -6.0% (1)
Total debt 6,736 6,714 6,682 6,594 6,634 -1.5%
Less: (2)
Operating debt 866 866 866 866 866 0.0%
25% of capital securities 302 302 302 302 302 0.0%
Carrying value of fair value hedges and other items 451 428 395 306 345 -23.5%
Total numerator $ 5,117 $ 5,118 $ 5,119 $ 5,120 $ 5,121 0.1%
Stockholders’ equity, excluding unrealized
investment gains (losses) $ 13,063 $ 13,396 $ 13,490 $ 13,553 $ 13,989 7.1%
Add: 25% of capital securities 302 302 302 302 302 0.0%
Total numerator 5,117 5,118 5,119 5,120 5,121 0.1%
Total denominator $ 18,482 $ 18,816 $ 18,911 $ 18,975 $ 19,412 5.0%
Leverage ratio 27.7% 27.2% 27.1% 27.0% 26.4%
Holding Company Available Liquidity $ 774 $ 756 $ 754 $ 758 $ 762 -1.6%
(1) Excludes obligations under finance leases and certain financing arrangements of $499 million that are reported in other liabilities on our Consolidated Balance Sheets.
(2) We have categorized as operating debt the senior notes issued in October 2007 and June 2010 because the proceeds were used as a long-term structured solution to reduce the strain
on increasing statutory reserves associated with secondary guarantee UL and term policies.
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Lincoln Financial Group
Segment and Sources of Earnings
Unaudited (millions of dollars)
Change Change
Income (Loss) from Operations, Pre-Tax
Annuities $ 272 $ 220 $ 338 $ 350 $ 380 39.7% $ 574 $ 730 27.2%
Retirement Plan Services 33 58 57 70 74 124.2% 78 144 84.6%
Life Insurance (52) (400) 177 130 317 NM 157 447 184.7%
Group Protection 49 8 (54) (33) 59 20.4% 100 26 -74.0%
Other Operations (107) (98) (125) (96) (101) 5.6% (157) (197) -25.5%
Adjusted income (loss) from operations, before income taxes $ 195 $ (212) $ 393 $ 421 $ 729 273.8% $ 752 $ 1,150 52.9%
Income (Loss) from Operations, After-Tax
Annuities $ 237 $ 196 $ 289 $ 290 $ 323 36.3% $ 498 $ 613 23.1%
Retirement Plan Services 30 50 49 57 62 106.7% 69 118 71.0%
Life Insurance (37) (311) 144 107 255 NM 134 362 170.1%
Group Protection 39 6 (42) (26) 46 17.9% 79 20 -74.7%
Other Operations (82) (74) (94) (78) (78) 4.9% (128) (154) -20.3% Adjusted income (loss) from operations $ 187 $ (133) $ 346 $ 350 $ 608 225.1% $ 652 $ 959 47.1%
Change Change
Sources of Earnings, Pre-Tax
Investment spread $ 39 $ (119) $ 147 $ 130 $ 228 NM $ 237 $ 387 63.3%
Mortality/morbidity 15 (208) 47 39 219 NM 250 97 -61.2%
Fees on AUM 245 321 308 332 363 48.2% 1,072 1,321 23.2%
VA riders 3 (108) 16 16 20 NM (1) (56) NM
Total sources of earnings, before income taxes 302 (114) 518 517 830 174.8% 1,558 1,749 12.3%
Other Operations (107) (98) (125) (96) (101) 5.6% (344) (418) -21.5%
Adjusted income (loss) from operations, before
income taxes $ 195 $ (212) $ 393 $ 421 $ 729 273.8% $ 1,214 $ 1,331 9.6%
Investment spread 12.7% 103.7% 28.5% 25.2% 27.5% 15.2% 22.1%
Mortality/morbidity 4.8% 181.6% 9.1% 7.5% 26.4% 16.1% 5.6%
Fees on AUM 81.3% -279.5% 59.4% 64.1% 43.6% 68.8% 75.5%
VA riders 1.2% 94.2% 3.0% 3.2% 2.5% -0.1% -3.2%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
For the Six Months Ended
6/30/20 6/30/21
For the Three Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21
For the Three Months Ended For the Trailing Twelve Months
6/30/20
Sources of Earnings, Pre-Tax, Percentage By Component
6/30/21 9/30/20 12/31/20 3/31/21 6/30/21 6/30/20
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Lincoln Financial Group
Select Earnings Drivers By Segment
Unaudited (millions of dollars)
For the Three Months Ended For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Annuities
Operating revenues $ 1,037 $ 1,126 $ 1,163 $ 1,204 $ 1,249 20.4% $ 2,166 $ 2,453 13.3%
Deposits 2,515 2,539 2,510 2,814 3,209 27.6% 6,211 6,023 -3.0%
Net flows 58 (283) (644) (776) (297) NM 585 (1,073) NM
Average account values 134,197 144,368 150,875 160,099 166,034 23.7% 136,114 163,091 19.8%
Retirement Plan Services
Operating revenues $ 282 $ 311 $ 323 $ 327 $ 333 18.1% $ 579 $ 660 14.0%
Deposits 2,307 2,374 2,557 2,640 2,789 20.9% 5,086 5,428 6.7%
Net flows (1,207) 362 340 347 517 142.8% (536) 864 261.2%
Average account values 73,611 79,644 83,889 89,589 94,096 27.8% 75,187 91,902 22.2%
Life Insurance
Operating revenues $ 1,639 $ 2,127 $ 1,928 $ 1,939 $ 2,029 23.8% $ 3,460 $ 3,968 14.7%
Deposits 1,428 1,537 1,476 1,219 1,278 -10.5% 2,878 2,498 -13.2%
Net flows 1,023 1,156 996 793 879 -14.1% 1,986 1,673 -15.8%
Average account values 52,693 54,570 56,419 58,008 59,056 12.1% 52,780 58,532 10.9%
Average in-force face amount 853,071 870,505 886,005 900,973 916,600 7.4% 844,779 908,786 7.6%
Group Protection
Operating revenues $ 1,199 $ 1,184 $ 1,184 $ 1,254 $ 1,247 4.0% $ 2,424 $ 2,500 3.1%
Insurance premiums 1,086 1,052 1,049 1,119 1,107 1.9% 2,179 2,226 2.2%
Consolidated (1)
Adjusted operating revenues $ 4,209 $ 4,788 $ 4,655 $ 4,762 $ 4,903 16.5% $ 8,719 $ 9,665 10.8%
Deposits 6,250 6,450 6,543 6,673 7,276 16.4% 14,175 13,949 -1.6%
Net flows (126) 1,235 692 364 1,099 NM 2,035 1,464 -28.1%
Average account values 260,501 278,582 291,183 307,696 319,186 22.5% 264,081 313,525 18.7%
(1) See reconciliation to total revenues on page 24.
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Lincoln Financial Group
Sales By Segment
Unaudited (millions of dollars)
Change Change
Sales
Annuities:
With guaranteed living benefits $ 824 $ 541 $ 507 $ 638 $ 742 -10.0% $ 2,008 $ 1,381 -31.2%
Without guaranteed living benefits 1,392 1,911 1,921 2,090 2,283 64.0% 2,846 4,373 53.7%
Variable 2,216 2,452 2,428 2,728 3,025 36.5% 4,854 5,754 18.5%
Fixed 299 87 82 86 184 -38.5% 1,357 269 -80.2%
Total Annuities $ 2,515 $ 2,539 $ 2,510 $ 2,814 $ 3,209 27.6% $ 6,211 $ 6,023 -3.0%
Retirement Plan Services:
First-year sales $ 827 $ 870 $ 1,107 $ 694 $ 1,102 33.3% $ 1,694 $ 1,796 6.0%
Recurring deposits 1,480 1,504 1,450 1,946 1,687 14.0% 3,392 3,632 7.1%
Total Retirement Plan Services $ 2,307 $ 2,374 $ 2,557 $ 2,640 $ 2,789 20.9% $ 5,086 $ 5,428 6.7%
Life Insurance:
UL $ 5 $ 3 $ 3 $ 2 $ 2 -60.0% $ 14 $ 4 -71.4%
MoneyGuard ®
36 35 22 16 23 -36.1% 70 39 -44.3%
IUL 23 24 22 16 18 -21.7% 44 34 -22.7%
VUL 55 60 30 22 27 -50.9% 98 49 -50.0%
Term 36 28 32 30 35 -2.8% 72 64 -11.1%
Total individual life insurance 155 150 109 86 105 -32.3% 298 190 -36.2%
Executive Benefits 4 36 6 28 21 NM 30 50 66.7%
Total Life Insurance $ 159 $ 186 $ 115 $ 114 $ 126 -20.8% $ 328 $ 240 -26.8%
Group Protection:
Life $ 47 $ 24 $ 144 $ 41 $ 37 -21.3% $ 98 $ 78 -20.4%
Disability 47 17 291 28 37 -21.3% 89 65 -27.0%
Dental 11 8 15 5 5 -54.5% 20 10 -50.0%
Total Group Protection $ 105 $ 49 $ 450 $ 74 $ 79 -24.8% $ 207 $ 153 -26.1%
Percent employee-paid 51.6% 58.9% 28.4% 66.7% 56.3% 55.7% 61.3%
For the Three Months Ended For the Six Months Ended
6/30/20 6/30/21 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21
Page 9
Lincoln Financial Group
Operating Revenues and General and Administrative Expenses By Segment
Unaudited (millions of dollars)
Change Change
Operating Revenues
Annuities $ 1,037 $ 1,126 $ 1,163 $ 1,204 $ 1,249 20.4% $ 2,166 $ 2,453 13.3%
Retirement Plan Services 282 311 323 327 333 18.1% 579 660 14.0%
Life Insurance 1,639 2,127 1,928 1,939 2,029 23.8% 3,460 3,968 14.7%
Group Protection 1,199 1,184 1,184 1,254 1,247 4.0% 2,424 2,500 3.1%
Other Operations 52 40 57 38 45 -13.5% 90 84 -6.7%
Total segment operating revenues $ 4,209 $ 4,788 $ 4,655 $ 4,762 $ 4,903 16.5% $ 8,719 $ 9,665 10.8%
General and Administrative Expenses,
Net of Amounts Capitalized(1)
Annuities $ 111 $ 111 $ 126 $ 116 $ 121 9.0% $ 232 $ 237 2.2%
Retirement Plan Services 68 69 78 69 73 7.4% 141 142 0.7%
Life Insurance 116 118 126 118 126 8.6% 238 244 2.5%
Group Protection 153 155 164 158 161 5.2% 304 320 5.3%
Other Operations 55 34 71 44 46 -16.4% 51 90 76.5%
Total $ 503 $ 487 $ 565 $ 505 $ 527 4.8% $ 966 $ 1,033 6.9%
General and Administrative Expenses,
Net of Amounts Capitalized, as a Percentage
of Operating Revenues
Annuities 10.7% 9.9% 10.8% 9.7% 9.6% 10.7% 9.7%
Retirement Plan Services 24.3% 22.3% 24.2% 21.2% 21.9% 24.3% 21.5%
Life Insurance 7.1% 5.5% 6.5% 6.1% 6.2% 6.9% 6.1%
Group Protection 12.7% 13.1% 13.8% 12.5% 13.0% 12.6% 12.8%
Other Operations 107.5% 83.7% 125.8% 115.6% 100.8% 57.1% 107.6%
Total 12.0% 10.2% 12.1% 10.6% 10.7% 11.1% 10.7%
For the Three Months Ended For the Six Months Ended
6/30/20 6/30/21 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21
(1) See page 11 for general and administrative expenses capitalized.
Page 10
Lincoln Financial Group
Operating Commissions and Other Expenses
Unaudited (millions of dollars)
For the Three Months Ended For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Operating Commissions and
Other Expenses Incurred
General and administrative expenses $ 554 $ 537 $ 638 $ 556 $ 579 4.5% $ 1,073 $ 1,135 5.8%
Commissions 621 611 625 616 652 5.0% 1,327 1,268 -4.4%
Taxes, licenses and fees 79 85 73 87 86 8.9% 169 173 2.4%
Interest and debt expense 68 66 65 65 65 -4.4% 137 131 -4.4%
Expenses associated with reserve financing
and letters of credit 23 24 25 25 25 8.7% 45 50 11.1%
Total adjusted operating commissions and other
expenses incurred 1,345 1,323 1,426 1,349 1,407 4.6% 2,751 2,757 0.2%
Less Amounts Capitalized
General and administrative expenses (51) (50) (73) (51) (52) -2.0% (107) (102) 4.7%
Commissions (291) (272) (250) (233) (261) 10.3% (652) (492) 24.5%
Taxes, licenses and fees (13) (11) (9) (8) (11) 15.4% (26) (20) 23.1%
Total amounts capitalized (355) (333) (332) (292) (324) 8.7% (785) (614) 21.8%
Total expenses incurred, net of amounts
capitalized, excluding amortization 990 990 1,094 1,057 1,083 9.4% 1,966 2,143 9.0%
Amortization
Amortization of DAC, VOBA and other intangibles 207 680 218 247 317 53.1% 455 563 23.7%
Total operating commissions and other expenses $ 1,197 $ 1,670 $ 1,312 $ 1,304 $ 1,400 17.0% $ 2,421 $ 2,706 11.8%
Page 11
Lincoln Financial Group
Interest Rate Yields and Spreads By Segment
Unaudited
Change Change
Annuities
Earned rate on reserves 3.69% 3.63% 3.42% 3.27% 3.10% (59) 3.71% 3.18% (53)
Variable investment income on reserves (1)
0.10% 0.09% 0.15% 0.11% 0.24% 14 0.06% 0.18% 12
Net investment income yield on reserves 3.79% 3.72% 3.57% 3.38% 3.34% (45) 3.77% 3.36% (41)
Interest rate credited to contract holders 2.26% 2.12% 1.97% 2.00% 1.90% (36) 2.28% 1.95% (33)
Interest rate spread 1.53% 1.60% 1.60% 1.38% 1.44% (9) 1.49% 1.41% (8)
Base spreads excluding variable investment income 1.43% 1.51% 1.45% 1.27% 1.20% (23) 1.43% 1.23% (20)
Retirement Plan Services
Earned rate on reserves 3.85% 3.82% 3.68% 3.64% 3.60% (25) 3.90% 3.61% (29)
Variable investment income on reserves (1)
0.06% 0.10% 0.21% 0.17% 0.21% 15 0.06% 0.20% 14
Net investment income yield on reserves 3.91% 3.92% 3.89% 3.81% 3.81% (10) 3.96% 3.81% (15)
Interest rate credited to contract holders 2.86% 2.81% 2.78% 2.68% 2.69% (17) 2.88% 2.68% (20)
Interest rate spread 1.05% 1.11% 1.11% 1.13% 1.12% 7 1.08% 1.13% 5
Base spreads excluding variable investment income 0.99% 1.01% 0.90% 0.96% 0.91% (8) 1.02% 0.93% (9)
Life Insurance – Interest-Sensitive
Earned rate on reserves 4.78% 4.76% 4.71% 4.71% 4.68% (10) 4.77% 4.70% (7)
Variable investment income on reserves (1)
-0.72% 0.76% 0.95% 1.05% 1.38% 210 -0.21% 1.21% 142
Net investment income yield on reserves 4.06% 5.52% 5.66% 5.76% 6.06% 200 4.56% 5.91% 135
Interest rate credited to contract holders 3.81% 3.75% 3.83% 3.76% 3.78% (3) 3.80% 3.77% (3)
Interest rate spread 0.25% 1.77% 1.83% 2.00% 2.28% 203 0.76% 2.14% 138
Base spreads excluding variable investment income 0.97% 1.01% 0.88% 0.95% 0.90% (7) 0.97% 0.93% (4)
Total(2)
Earned rate (3)
4.06% 4.09% 4.04% 3.96% 3.94% (12) 4.18% 3.94% (24)
Variable investment income (1) (3)
-0.34% 0.45% 0.56% 0.59% 0.78% 112 -0.08% 0.69% 77
Net investment income yield (3)
3.72% 4.54% 4.60% 4.55% 4.72% 100 4.10% 4.63% 53
For the Three Months Ended For the Six Months Ended
6/30/20 6/30/21 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21
(1) Variable investment income consists of commercial mortgage loan prepayment and bond make-whole premiums and investment income on alternative investments.
(2) Includes the results of all of our business segments and Other Operations.
(3) Includes investment yields on reserves and surplus.
Page 12
Select Earnings and Operational
Data from Business Segments
Lincoln Financial Group
Annuities – Select Earnings and Operational Data
Unaudited (millions of dollars)
As of or For the Three Months Ended As of or For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Income (Loss) from Operations
Operating revenues:
Insurance premiums $ 22 $ 17 $ 29 $ 32 $ 27 22.7% $ 75 $ 59 -21.3%
Fee income 567 608 626 652 679 19.8% 1,160 1,332 14.8%
Net investment income 270 334 343 328 352 30.4% 595 680 14.3%
Operating realized gain (loss) 49 57 54 50 53 8.2% 104 103 -1.0%
Amortization of deferred gain 8 8 5 6 6 -25.0% 16 12 -25.0%
Other revenues 121 102 106 136 132 9.1% 216 267 23.6%
Total operating revenues 1,037 1,126 1,163 1,204 1,249 20.4% 2,166 2,453 13.3%
Operating expenses:
Interest credited 192 198 191 199 199 3.6% 384 398 3.6%
Benefits 127 261 138 141 135 6.3% 297 275 -7.4%
Commissions incurred 246 248 255 275 297 20.7% 558 573 2.7%
Other expenses incurred 221 232 252 255 264 19.5% 470 519 10.4%
Amounts capitalized (122) (118) (117) (127) (144) -18.0% (313) (271) 13.4%
Amortization 101 85 106 111 118 16.8% 196 229 16.8%
Total operating expenses 765 906 825 854 869 13.6% 1,592 1,723 8.2%
Income (loss) from operations before taxes 272 220 338 350 380 39.7% 574 730 27.2%
Federal income tax expense (benefit) 35 24 49 60 57 62.9% 76 117 53.9% Income (loss) from operations $ 237 $ 196 $ 289 $ 290 $ 323 36.3% $ 498 $ 613 23.1%
Effective Federal Income Tax Rate 12.9% 11.1% 14.5% 17.2% 15.0% 13.2% 16.0%
Average Equity, Excluding Goodwill and AOCI $ 5,002 $ 5,394 $ 5,405 $ 5,071 $ 5,077 1.5% $ 4,945 $ 5,074 2.6%
ROE, Excluding Goodwill and AOCI 19.0% 14.5% 21.4% 22.9% 25.5% 20.2% 24.2%
Return on Average Account Values 71 54 77 72 78 7 73 75 2
Income (Loss) from Operations
Variable annuity 207 176 254 261 293 41.5% 439 553 26.0%
Fixed annuity 30 20 35 29 30 0.0% 59 60 1.7%
Account Values - Average
Variable account values $ 116,861 $ 127,011 $ 133,630 $ 142,990 $ 149,066 27.6% $ 118,979 $ 146,042 22.7%
Fixed account values 17,336 17,357 17,245 17,109 16,968 -2.1% 17,135 17,049 -0.5%
Account Values - End of Period
Variable account values with GLBs $ 74,858 $ 77,084 $ 83,377 $ 84,155 $ 86,901 16.1% $ 74,858 $ 86,901 16.1%
Variable account values without GLBs 46,854 50,501 56,936 60,002 64,495 37.7% 46,854 64,495 37.7%
Fixed account values 17,349 17,263 17,205 16,966 16,911 -2.5% 17,349 16,911 -2.5%
Page 13
Lincoln Financial Group
Retirement Plan Services – Select Earnings and Operational Data
Unaudited (millions of dollars)
As of or For the Three Months Ended As of or For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Income (Loss) from Operations
Operating revenues:
Fee income $ 58 $ 65 $ 69 $ 71 $ 74 27.6% $ 119 $ 146 22.7%
Net investment income 218 240 246 248 250 14.7% 447 498 11.4%
Other revenues 6 6 8 8 9 50.0% 13 16 23.1%
Total operating revenues 282 311 323 327 333 18.1% 579 660 14.0%
Operating expenses:
Interest credited 153 155 157 155 155 1.3% 303 309 2.0%
Benefits 1 1 - 1 1 0.0% 1 1 0.0%
Commissions incurred 18 19 20 21 20 11.1% 37 42 13.5%
Other expenses incurred 77 74 86 77 79 2.6% 159 158 -0.6%
Amounts capitalized (6) (4) (5) (5) (4) 33.3% (12) (10) 16.7%
Amortization 6 8 8 8 8 33.3% 13 16 23.1%
Total operating expenses 249 253 266 257 259 4.0% 501 516 3.0%
Income (loss) from operations before taxes 33 58 57 70 74 124.2% 78 144 84.6%
Federal income tax expense (benefit) 3 8 8 13 12 300.0% 9 26 188.9%
Income (loss) from operations $ 30 $ 50 $ 49 $ 57 $ 62 106.7% $ 69 $ 118 71.0%
Effective Federal Income Tax Rate 10.1% 13.7% 14.6% 18.9% 16.7% 10.8% 17.8%
Average Equity, Excluding Goodwill and AOCI $ 1,410 $ 1,441 $ 1,480 $ 1,526 $ 1,535 8.9% $ 1,413 $ 1,530 8.3%
ROE, Excluding Goodwill and AOCI 8.5% 13.8% 13.2% 14.9% 16.1% 9.8% 15.5%
Pre-tax Net Margin 25.8% 36.8% 34.4% 40.4% 41.5% 28.3% 41.0%
Return on Average Account Values 16 25 23 25 26 10 18 26 8
Net Flows by Market
Small Market 30 113 66 (28) 106 253.3% $ 171 $ 79 -53.8%
Mid - Large Market (1,084) 500 587 680 755 169.6% (294) 1,435 NM
Multi-Fund ® and Other (153) (251) (313) (305) (344) NM (413) (650) -57.4%
Net Flows – Trailing Twelve Months $ 158 $ 248 $ 166 $ (158) $ 1,566 NM $ 158 $ 1,566 NM
Page 14
Lincoln Financial Group
Life Insurance – Select Earnings and Operational Data
Unaudited (millions of dollars)
As of or For the Three Months Ended As of or For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Income (Loss) from Operations
Operating revenues:
Insurance premiums $ 230 $ 223 $ 274 $ 253 $ 258 12.2% $ 454 $ 511 12.6%
Fee income 830 1,141 861 867 915 10.2% 1,723 1,783 3.5%
Net investment income 577 761 787 809 852 47.7% 1,274 1,661 30.4%
Operating realized gain (loss) (2) - (1) (2) (2) 0.0% (5) (4) 20.0%
Amortization of deferred gain on
business sold through reinsurance 3 3 4 3 3 0.0% 6 5 -16.7%
Other revenues 1 (1) 3 9 3 200.0% 8 12 50.0%
Total operating revenues 1,639 2,127 1,928 1,939 2,029 23.8% 3,460 3,968 14.7%
Operating expenses:
Interest credited 375 369 375 370 372 -0.8% 746 742 -0.5%
Benefits 1,084 1,428 1,120 1,173 999 -7.8% 2,037 2,172 6.6%
Commissions incurred 173 171 152 120 130 -24.9% 364 250 -31.3%
Other expenses incurred 195 209 204 194 208 6.7% 405 403 -0.5%
Amounts capitalized (202) (202) (168) (138) (154) 23.8% (418) (293) 29.9%
Amortization 66 552 68 90 157 137.9% 169 247 46.2%
Total operating expenses 1,691 2,527 1,751 1,809 1,712 1.2% 3,303 3,521 6.6%
Income (loss) from operations before taxes (52) (400) 177 130 317 NM 157 447 184.7%
Federal income tax expense (benefit) (15) (89) 33 23 62 NM 23 85 269.6%
Income (loss) from operations $ (37) $ (311) $ 144 $ 107 $ 255 NM $ 134 $ 362 170.1%
Effective Federal Income Tax Rate 28.9% 22.2% 18.6% 17.7% 19.7% 14.5% 19.1%
Average Equity, Excluding Goodwill and AOCI $ 8,977 $ 8,854 $ 8,788 $ 8,909 $ 9,035 0.6% $ 8,888 $ 8,972 0.9%
ROE, Excluding Goodwill and AOCI -1.6% -14.1% 6.5% 4.8% 11.3% 3.0% 8.1%
Average Account Values $ 52,693 $ 54,570 $ 56,419 $ 58,008 $ 59,056 12.1% $ 52,780 $ 58,532 10.9%
In-Force Face Amount
UL and other $ 357,690 $ 358,897 $ 358,554 $ 358,044 $ 357,670 0.0% $ 357,690 $ 357,670 0.0%
Term insurance 505,251 519,173 535,387 549,960 567,525 12.3% 505,251 567,525 12.3%
Total in-force face amount $ 862,941 $ 878,070 $ 893,941 $ 908,004 $ 925,195 7.2% $ 862,941 $ 925,195 7.2%
Page 15
Lincoln Financial Group
Group Protection – Select Earnings and Operational Data
Unaudited (millions of dollars)
As of or For the Three Months Ended As of or For the Six Months Ended
Income (Loss) from Operations
Operating revenues:
Insurance premiums
Net investment income
Other revenues
Total operating revenues
Operating expenses:
Interest credited
Benefits
Commissions incurred
Other expenses incurred
Amounts capitalized
Amortization
Total operating expenses
Income (loss) from operations before taxes
Federal income tax expense (benefit)
Income (loss) from operations
6/30/20
$ 1,086
69
44
1,199
1
843
97
198
(23)
34
1,150
49
10
$ 39
9/30/20
$ 1,052
88
44
1,184
1
875
80
194
(9)
35
1,176
8
2
$ 6
12/31/20
$ 1,049
91
44
1,184
1
920
95
227
(41)
36
1,238
(54)
(12)
$ (42)
3/31/21
$ 1,119
91
44
1,254
1
970
91
208
(21)
38
1,287
(33)
(7)
$ (26)
6/30/21
$ 1,107
95
45
1,247
1
877
87
210
(21)
34
1,188
59
13
$ 46
Change
1.9%
37.7%
2.3%
4.0%
0.0%
4.0%
-10.3%
6.1%
8.7%
0.0%
3.3%
20.4%
30.0%
17.9%
6/30/20
$ 2,179
151
94
2,424
3
1,706
183
397
(42)
77
2,324
100
21
$ 79
6/30/21
$ 2,226
185
89
2,500
3
1,847
178
417
(42)
71
2,474
26
6
$ 20
Change
2.2%
22.5%
-5.3%
3.1%
0.0%
8.3%
-2.7%
5.0%
0.0%
-7.8%
6.5%
-74.0%
-71.4%
-74.7%
Effective Federal Income Tax Rate 21.0% 21.0% 21.0% 21.0% 21.0% 21.0% 21.0%
Average Equity, Excluding Goodwill and AOCI $ 2,628 $ 2,678 $ 2,711 $ 2,718 $ 2,731 3.9% $ 2,615 $ 2,725 4.2%
ROE, Excluding Goodwill and AOCI 5.9% 0.9% -6.3% -3.8% 6.8% 6.0% 1.5%
Loss Ratios by Product Line
Life
Disability
Dental
Total
82.6%
78.7%
40.2%
77.8%
91.9%
78.9%
70.1%
83.2%
93.4%
86.2%
67.3%
87.8%
101.0%
78.8%
76.8%
86.8%
79.6%
79.0%
81.6%
79.3%
81.0%
78.5%
57.7%
78.1%
90.2%
78.9%
79.2%
83.1%
Page 16
Lincoln Financial Group
Other Operations – Select Earnings and Operational Data
Unaudited (millions of dollars)
For the Three Months Ended For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Other Operations
Operating revenues:
Insurance premiums $ 5 $ 2 $ 11 $ 2 $ 6 20.0% $ 7 $ 8 14.3%
Net investment income 38 35 38 34 35 -7.9% 80 70 -12.5%
Other revenues 9 3 8 2 4 -55.6% 3 6 100.0%
Total operating revenues 52 40 57 38 45 -13.5% 90 84 -6.7%
Operating expenses:
Interest credited 11 9 8 12 10 -9.1% 23 22 -4.3%
Benefits 30 33 40 15 25 -16.7% 46 40 -13.0%
Commissions and other expenses 36 10 46 29 25 -30.6% 15 53 253.3%
Interest and debt expense 68 66 65 65 65 -4.4% 137 131 -4.4%
Strategic digitization expense 14 20 23 13 21 50.0% 26 35 34.6%
Total operating expenses 159 138 182 134 146 -8.2% 247 281 13.8%
Income (loss) from operations before taxes (107) (98) (125) (96) (101) 5.6% (157) (197) -25.5%
Federal income tax expense (benefit) (25) (24) (31) (18) (23) 8.0% (29) (43) -48.3% Income (loss) from operations $ (82) $ (74) $ (94) $ (78) $ (78) 4.9% $ (128) $ (154) -20.3%
Page 17
DAC, VOBA, DSI, DFEL
& Account Value Roll Forwards
Lincoln Financial Group
Consolidated – DAC, VOBA, DSI and DFEL Roll Forwards
Unaudited (millions of dollars)
For the Three Months Ended For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
DAC, VOBA and DSI
Balance as of beginning-of-period $ 9,457 $ 7,241 $ 6,520 $ 6,025 $ 7,884 -16.6% $ 7,928 $ 6,025 -24.0%
Business acquired (sold) through reinsurance - - - - - NM (10) - 100.0%
Cumulative effect from adoption of new
accounting standard - - - - - NM 5 - -100.0%
Deferrals 355 334 333 295 325 -8.5% 790 619 -21.6%
Operating amortization (204) (679) (212) (244) (314) -53.9% (447) (558) -24.8%
Deferrals, net of operating amortization 151 (345) 121 51 11 -92.7% 343 61 -82.2%
Amortization associated with benefit ratio unlocking (4) (10) (30) (6) (11) NM 62 (17) NM
Adjustment related to realized (gains) losses 33 (198) 87 50 (10) NM 91 41 -54.9%
Adjustment related to unrealized (gains) losses (2,396) (168) (673) 1,764 (1,402) 41.5% (1,178) 362 130.7%
Balance as of end-of-period $ 7,241 $ 6,520 $ 6,025 $ 7,884 $ 6,472 -10.6% $ 7,241 $ 6,472 -10.6%
DFEL
Balance as of beginning-of-period $ 1,379 $ 433 $ 392 $ 401 $ 559 -59.5% $ 650 $ 401 -38.3%
Cumulative effect from adoption of new
accounting standard - - - - - NM 4 - -100.0%
Deferrals 252 263 249 231 240 -4.8% 492 471 -4.3%
Operating amortization (111) (424) (120) (131) (179) -61.3% (270) (310) -14.8%
Deferrals, net of operating amortization 141 (161) 129 100 61 -56.7% 222 161 -27.5%
Amortization associated with benefit ratio unlocking (2) (1) (4) (1) (2) 0.0% 6 (2) NM
Adjustment related to realized (gains) losses 12 (14) 9 1 (2) NM 29 (2) NM
Adjustment related to unrealized (gains) losses (1,097) 135 (125) 58 (183) 83.3% (478) (125) 73.8%
Balance as of end-of-period $ 433 $ 392 $ 401 $ 559 $ 433 0.0% $ 433 $ 433 0.0%
DAC, VOBA, DSI and DFEL
Balance as of End-of-Period, After-Tax $ 5,378 $ 4,841 $ 4,443 $ 5,787 $ 4,771 -11.3% $ 5,378 $ 4,771 -11.3%
Page 18
Lincoln Financial Group
Annuities – Account Value Roll Forwards
Unaudited (millions of dollars)
Change Change
Fixed Annuities
Balance as of beginning-of-period $ 25,740 $ 25,801 $ 25,572 $ 25,405 $ 25,008 -2.8% $ 25,384 $ 25,405 0.1%
Gross deposits 299 87 82 86 184 -38.5% 1,357 269 -80.2%
Full surrenders and deaths (384) (399) (400) (494) (482) -25.5% (784) (975) -24.4%
Other contract benefits (143) (135) (145) (141) (115) 19.6% (299) (257) 14.0%
Net flows (228) (447) (463) (549) (413) -81.1% 274 (963) NM
Contract holder assessments (16) (16) (19) (25) (22) -37.5% (28) (45) -60.7%
Reinvested interest credited 305 234 315 177 267 -12.5% 171 443 159.1%
Balance as of end-of-period, gross 25,801 25,572 25,405 25,008 24,840 -3.7% 25,801 24,840 -3.7%
Reinsurance ceded (8,452) (8,309) (8,200) (8,042) (7,929) 6.2% (8,452) (7,929) 6.2%
Balance as of end-of-period, net $ 17,349 $ 17,263 $ 17,205 $ 16,966 $ 16,911 -2.5% $ 17,349 $ 16,911 -2.5%
Variable Annuities
Balance as of beginning-of-period $ 108,689 $ 121,713 $ 127,585 $ 140,313 $ 144,157 32.6% $ 125,492 $ 140,313 11.8%
Gross deposits 2,216 2,452 2,428 2,728 3,025 36.5% 4,854 5,754 18.5%
Full surrenders and deaths (1,068) (1,384) (1,600) (1,901) (1,871) -75.2% (2,670) (3,772) -41.3%
Other contract benefits (862) (904) (1,009) (1,054) (1,038) -20.4% (1,873) (2,092) -11.7%
Net flows 286 164 (181) (227) 116 -59.4% 311 (110) NM
Contract holder assessments (611) (648) (666) (684) (705) -15.4% (1,243) (1,390) -11.8%
Change in market value and reinvestment 13,349 6,356 13,575 4,755 7,828 -41.4% (2,847) 12,583 NM
Balance as of end-of-period, gross 121,713 127,585 140,313 144,157 151,396 24.4% 121,713 151,396 24.4%
Reinsurance ceded (1) - - - - 100.0% (1) - 100.0%
Balance as of end-of-period, net $ 121,712 $ 127,585 $ 140,313 $ 144,157 $ 151,396 24.4% $ 121,712 $ 151,396 24.4%
Total
Balance as of beginning-of-period $ 134,429 $ 147,514 $ 153,157 $ 165,718 $ 169,165 25.8% $ 150,876 $ 165,718 9.8%
Gross deposits 2,515 2,539 2,510 2,814 3,209 27.6% 6,211 6,023 -3.0%
Full surrenders and deaths (1,452) (1,783) (2,000) (2,395) (2,353) -62.1% (3,454) (4,747) -37.4%
Other contract benefits (1,005) (1,039) (1,154) (1,195) (1,153) -14.7% (2,172) (2,349) -8.1%
Net flows 58 (283) (644) (776) (297) NM 585 (1,073) NM
Contract holder assessments (627) (664) (685) (709) (727) -15.9% (1,271) (1,435) -12.9%
Change in market value and reinvestment 13,654 6,590 13,890 4,932 8,095 -40.7% (2,676) 13,026 NM
Balance as of end-of-period, gross 147,514 153,157 165,718 169,165 176,236 19.5% 147,514 176,236 19.5%
Reinsurance ceded (8,453) (8,309) (8,200) (8,042) (7,929) 6.2% (8,453) (7,929) 6.2%
Balance as of end-of-period, net $ 139,061 $ 144,848 $ 157,518 $ 161,123 $ 168,307 21.0% $ 139,061 $ 168,307 21.0%
For the Three Months Ended For the Six Months Ended
6/30/20 6/30/21 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21
Page 19
Lincoln Financial Group
Retirement Plan Services – Account Value Roll Forwards
Unaudited (millions of dollars)
Change Change
General Account
Balance as of beginning-of-period $ 21,335 $ 21,672 $ 22,316 $ 22,916 $ 23,008 7.8% $ 20,558 $ 22,916 11.5%
Gross deposits 817 568 731 490 424 -48.1% 1,426 913 -36.0%
Withdrawals (752) (477) (533) (583) (590) 21.5% (1,317) (1,173) 10.9%
Net flows 65 91 198 (93) (166) NM 109 (260) NM
Transfers between fixed and variable accounts 124 402 247 35 3 -97.6% 711 40 -94.4%
Contract holder assessments (3) (4) (3) (3) (3) 0.0% (6) (7) -16.7%
Reinvestment interest credited 151 155 158 153 153 1.3% 300 306 2.0%
Balance as of end-of-period $ 21,672 $ 22,316 $ 22,916 $ 23,008 $ 22,995 6.1% $ 21,672 $ 22,995 6.1%
Separate Account and Mutual Funds
Balance as of beginning-of-period $ 48,301 $ 54,886 $ 58,255 $ 65,391 $ 68,149 41.1% $ 58,131 $ 65,391 12.5%
Gross deposits 1,490 1,806 1,826 2,150 2,365 58.7% 3,660 4,515 23.4%
Withdrawals (2,762) (1,535) (1,684) (1,710) (1,682) 39.1% (4,305) (3,391) 21.2%
Net flows (1,272) 271 142 440 683 153.7% (645) 1,124 274.3%
Transfers between fixed and variable accounts (161) (436) (326) (141) (43) 73.3% (771) (185) 76.0%
Contract holder assessments (49) (50) (59) (62) (65) -32.7% (103) (127) -23.3%
Change in market value and reinvestment 8,067 3,584 7,379 2,521 4,189 -48.1% (1,726) 6,710 NM
Balance as of end-of-period $ 54,886 $ 58,255 $ 65,391 $ 68,149 $ 72,913 32.8% $ 54,886 $ 72,913 32.8%
Total
Balance as of beginning-of-period $ 69,636 $ 76,558 $ 80,571 $ 88,307 $ 91,157 30.9% $ 78,689 $ 88,307 12.2%
Gross deposits 2,307 2,374 2,557 2,640 2,789 20.9% 5,086 5,428 6.7%
Withdrawals (3,514) (2,012) (2,217) (2,293) (2,272) 35.3% (5,622) (4,564) 18.8%
Net flows (1,207) 362 340 347 517 142.8% (536) 864 261.2%
Transfers between fixed and variable accounts (37) (34) (79) (106) (40) -8.1% (60) (145) NM
Contract holder assessments (52) (54) (62) (65) (68) -30.8% (109) (134) -22.9%
Change in market value and reinvestment 8,218 3,739 7,537 2,674 4,342 -47.2% (1,426) 7,016 NM
Balance as of end-of-period $ 76,558 $ 80,571 $ 88,307 $ 91,157 $ 95,908 25.3% $ 76,558 $ 95,908 25.3%
For the Three Months Ended For the Six Months Ended
6/30/20 6/30/21 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21
Page 20
Lincoln Financial Group
Life Insurance – Account Value Roll Forwards
Unaudited (millions of dollars)
Change Change
General Account
Balance as of beginning-of-period $ 38,054 $ 38,034 $ 38,080 $ 38,136 $ 38,053 0.0% $ 38,141 $ 38,136 0.0%
Deposits 964 966 1,028 899 895 -7.2% 1,960 1,794 -8.5%
Withdrawals and deaths (263) (230) (282) (296) (243) 7.6% (643) (539) 16.2%
Net flows 701 736 746 603 652 -7.0% 1,317 1,255 -4.7%
Contract holder assessments (1,073) (1,079) (1,088) (1,073) (1,074) -0.1% (2,148) (2,148) 0.0%
Reinvested interest credited 352 389 398 387 382 8.5% 724 770 6.4%
Balance as of end-of-period, gross 38,034 38,080 38,136 38,053 38,013 -0.1% 38,034 38,013 -0.1%
Reinsurance ceded (646) (646) (640) (636) (628) 2.8% (646) (628) 2.8%
Balance as of end-of-period, net $ 37,388 $ 37,434 $ 37,496 $ 37,417 $ 37,385 0.0% $ 37,388 $ 37,385 0.0%
Separate Account
Balance as of beginning-of-period $ 14,782 $ 17,351 $ 18,671 $ 21,078 $ 21,983 48.7% $ 17,646 $ 21,078 19.4%
Deposits 464 571 448 320 383 -17.5% 918 704 -23.3%
Withdrawals and deaths (142) (151) (198) (130) (156) -9.9% (249) (286) -14.9%
Net flows 322 420 250 190 227 -29.5% 669 418 -37.5%
Contract holder assessments (211) (217) (209) (197) (203) 3.8% (415) (400) 3.6%
Change in market value and reinvestment 2,458 1,117 2,366 912 1,354 -44.9% (549) 2,265 NM
Balance as of end-of-period, gross 17,351 18,671 21,078 21,983 23,361 34.6% 17,351 23,361 34.6%
Reinsurance ceded (830) (874) (969) (990) (1,044) -25.8% (830) (1,044) -25.8%
Balance as of end-of-period, net $ 16,521 $ 17,797 $ 20,109 $ 20,993 $ 22,317 35.1% $ 16,521 $ 22,317 35.1%
Total
Balance as of beginning-of-period $ 52,836 $ 55,385 $ 56,751 $ 59,214 $ 60,036 13.6% $ 55,787 $ 59,214 6.1%
Deposits 1,428 1,537 1,476 1,219 1,278 -10.5% 2,878 2,498 -13.2%
Withdrawals and deaths (405) (381) (480) (426) (399) 1.5% (892) (825) 7.5%
Net flows 1,023 1,156 996 793 879 -14.1% 1,986 1,673 -15.8%
Contract holder assessments (1,284) (1,296) (1,297) (1,270) (1,277) 0.5% (2,563) (2,548) 0.6%
Change in market value and reinvestment 2,810 1,506 2,764 1,299 1,736 -38.2% 175 3,035 NM
Balance as of end-of-period, gross 55,385 56,751 59,214 60,036 61,374 10.8% 55,385 61,374 10.8%
Reinsurance ceded (1,476) (1,520) (1,609) (1,626) (1,672) -13.3% (1,476) (1,672) -13.3%
Balance as of end-of-period, net $ 53,909 $ 55,231 $ 57,605 $ 58,410 $ 59,702 10.7% $ 53,909 $ 59,702 10.7%
For the Three Months Ended For the Six Months Ended
6/30/20 6/30/21 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21
Page 21
Other Information
Lincoln Financial Group
Select Investment Data
Unaudited (millions of dollars)
As of 6/30/20 As of 12/31/20 As of 6/30/21
Amount % Amount % Amount %
Fixed Maturity AFS, Trading and Equity Securities, at Fair Value
Fixed maturity AFS securities, net of allowance for credit losses:
Corporate bonds $ 95,390 80.7% $ 102,789 80.5% $ 101,003 79.8%
U.S. government bonds 504 0.4% 484 0.4% 444 0.4%
State and municipal bonds 6,393 5.4% 6,921 5.4% 6,919 5.5%
Foreign government bonds 436 0.4% 470 0.4% 464 0.4%
Residential mortgage-backed securities 3,272 2.8% 3,076 2.4% 3,027 2.4%
Commercial mortgage-backed securities 1,226 1.0% 1,505 1.2% 1,578 1.2%
Asset-backed securities 5,716 4.8% 7,184 5.6% 8,177 6.5%
Hybrid and redeemable preferred securities 582 0.5% 615 0.5% 603 0.5%
Total fixed maturity AFS securities, net of allowance for credit losses 113,519 96.0% 123,044 96.4% 122,215 96.7%
Trading securities 4,651 3.9% 4,501 3.5% 4,232 3.2%
Equity securities 87 0.1% 129 0.1% 174 0.1%
Total fixed maturity AFS securities, net of allowance for credit losses, and trading and
equity securities $ 118,257 100.0% $ 127,674 100.0% $ 126,621 100.0%
Fixed Maturity AFS, Trading and Equity Securities, at Amortized Cost
Fixed maturity AFS securities $ 98,817 95.9% $ 104,174 96.1% $ 106,668 96.4%
Trading securities 4,096 4.0% 4,072 3.8% 3,851 3.5%
Equity securities 112 0.1% 132 0.1% 151 0.1%
Total fixed maturity AFS, trading and equity securities $ 103,025 100.0% $ 108,378 100.0% $ 110,670 100.0%
Percentage of Fixed Maturity AFS Securities, at Amortized Cost
Investment grade 95.8% 95.9% 96.2%
Below investment grade 4.2% 4.1% 3.8%
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Lincoln Financial Group
Realized Gain (Loss), After-DAC
Unaudited (millions of dollars)
For the Three Months Ended For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Components of Realized Gain (Loss), Pre-Tax
Total adjusted operating realized gain (loss) $ 47 $ 57 $ 53 $ 48 $ 51 8.5% $ 99 $ 99 0.0%
Total excluded realized gain (loss) (694) 572 (523) (229) (53) 92.4% (770) (281) 63.5%
Total realized gain (loss), pre-tax $ (647) $ 629 $ (470) $ (181) $ (2) 99.7% $ (671) $ (182) 72.9%
Components of Excluded Realized Gain (Loss), After-Tax
Credit loss benefit (expense) on mortgage loans on
real estate $ (79) $ 50 $ (6) $ 17 $ 8 110.1% $ (130) $ 26 120.0%
Credit loss benefit (expense) on other financial assets (1) (1) (2) (1) (3) NM (17) (4) 76.5%
Realized gain (loss) related to certain financial assets (36) (5) (7) 1 (5) 86.1% (22) (7) 68.2%
Realized gain (loss) on equity securities 2 3 13 8 16 NM (12) 26 NM
Realized gain (loss) on the mark-to-market on certain
instruments (1) (6) 2 19 (2) -100.0% 36 18 -50.0%
Realized gain (loss) related to financial assets, after-tax (115) 41 - 44 14 112.2% (145) 59 140.7%
Variable annuity net derivative results:
Hedge program performance, including unlocking
for GLB reserves hedged and benefit ratio unlocking (71) 12 (9) (42) 13 118.3% (568) (29) 94.9%
GLB non-performance risk component (79) 464 (240) (144) (1) 98.7% 69 (145) NM
Total variable annuity net derivative results (150) 476 (249) (186) 12 108.0% (499) (174) 65.1%
Indexed annuity forward-starting option (1) 18 12 17 8 NM (32) 23 171.9%
Excluded realized gain (loss), including
benefit ratio unlocking, after-tax (266) 535 (237) (125) 34 112.8% (676) (92) 86.4%
Less: benefit ratio unlocking, after-tax 282 83 177 55 77 -72.7% (67) 131 -30.0%
Total excluded realized gain (loss), after-tax $ (548) $ 452 (414) $ (180) $ (43) 92.2% $ (609) $ (223) 9.1%
Page 23
Lincoln Financial Group
Select GAAP to Non-GAAP Reconciliations
Unaudited (millions of dollars)
For the Three Months Ended For the Six Months Ended
6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 Change 6/30/20 6/30/21 Change
Revenues
Total revenues $ 3,517 $ 5,361 $ 4,135 $ 4,534 $ 4,851 37.9% $ 7,942 $ 9,386 18.2%
Less:
Excluded realized gain (loss) (694) 572 (523) (229) (53) 92.4% (770) (281) 63.5%
Amortization of DFEL associated with
benefit ratio unlocking 2 1 3 1 1 -50.0% (7) 2 128.6%
Adjusted operating revenues $ 4,209 $ 4,788 $ 4,655 $ 4,762 $ 4,903 16.5% $ 8,719 $ 9,665 10.8%
Net Income
Net income (loss) $ (94) $ 398 $ 143 $ 225 $ 642 NM $ (42) $ 867 NM
Less:
Excluded realized gain (loss), after-tax (548) 452 (414) (180) (43) 92.2% (609) (223) 63.4%
Benefit ratio unlocking, after-tax 282 83 177 55 77 -72.7% (67) 131 295.5%
Net impact from the Tax Cuts and Jobs Act - - 37 - - NM - - NM
Acquisition and integration costs related to
mergers and acquisitions, after-tax (3) (4) (3) - - 100.0% (6) - 100.0%
Gain (loss) on early extinguishment of debt, after-tax (12) - - - - 100.0% (12) - 100.0%
Total adjustments (281) 531 (203) (125) 34 112.1% (694) (92) 86.7%
Adjusted income (loss) from operations $ 187 $ (133) $ 346 $ 350 $ 608 225.1% $ 652 $ 959 47.1%
Earnings (Loss) Per Common Share – Diluted
Net income (loss) $ (0.49) $ 2.01 $ 0.74 $ 1.16 $ 3.34 NM $ (0.27) $ 4.51 NM
Less:
Excluded realized gain (loss), after-tax (2.85) 2.32 (2.12) (0.94) (0.22) 92.3% (3.13) (1.15) 63.3%
Benefit ratio unlocking, after-tax 1.46 0.43 0.91 0.28 0.39 -73.3% (0.35) 0.68 294.3%
Net impact from the Tax Cuts and Jobs Act - - 0.19 - - NM - - NM
Acquisition and integration costs related to mergers
and acquisitions, after-tax (0.01) (0.02) (0.02) - - 100.0% (0.04) - 100.0%
Gain (loss) on early extinguishment of debt, after-tax (0.06) - - - - 100.0% (0.06) - 100.0%
Adjustment attributable to using different average
diluted shares for adjusted income from operations
as compared to net loss - - - - - NM 0.04 - -100.0%
Adjusted income (loss) from operations $ 0.97 $ (0.72) $ 1.78 $ 1.82 $ 3.17 226.8% $ 3.27 $ 4.98 52.3%
Page 24